Nokia is in advanced talks to buy French rival Alcatel-Lucent.

If the purchase goes ahead it will create a European telecoms equipment group worth some €40bn.

The move marks a sensational turnaround by the Finnish company, which was in severe financial straits two years ago before selling its mobile phone division to Microsoft.

Both companies say that the deal is by no means certain.

The buyout has come under French government scrutiny as Paris sees the communications industry as strategic and any job losses will infuriate the administration.

Alcatel-Lucent is currently going through some severe restructuring after losing sales in its core US and European markets.

Shares in the French company moved up some 14 percent in
Paris trading.